Alibaba Group Holding Ltd. is once again a favourite among investors, driven by renewed optimism surrounding its role in China’s burgeoning artificial intelligence (AI) market. The e-commerce giant’s Hong Kong-listed shares have surged 46% since January, adding nearly $87 billion to its market value, outpacing the 25% gain of the Hang Seng Tech Index during the same period. This marks a surprising turnaround for Alibaba, which had fallen out of favour in recent years due to Beijing’s regulatory crackdown on tech giants and a post-Covid consumption slowdown.
The driving force behind Alibaba’s rally is its aggressive push into AI, particularly as Chinese AI startup DeepSeek has gained attention with its cost-effective AI technologies. The launch of Alibaba’s own AI services and platforms has drawn investor optimism, especially after reports surfaced that Apple Inc. is collaborating with Alibaba to roll out AI features in China. The announcement further boosted investor confidence, highlighting the potential of Alibaba’s AI-driven future.
This shift comes after Alibaba’s management underwent a restructuring in 2023 with Joe Tsai and Eddie Wu—two of Jack Ma’s original lieutenants—taking charge. The duo refocused the company on streamlining its core commerce operations and capitalising on AI opportunities. Alibaba’s recent AI investments in Chinese startups like Moonshot and Zhipu are expected to pay off in the long run, as the company seeks to position itself as a key player in AI alongside its rivals, including Baidu and ByteDance.
Despite the growth in Alibaba’s AI efforts, analysts remain cautious, pointing out that the domestic adoption of AI services in China has been slower than expected. Monetising AI remains a challenge, and the company faces strong competition from US tech giants like Amazon and Microsoft, whose cloud businesses have seen more rapid growth.
Still, Alibaba’s relatively low valuation, compared to its US peers, is attracting investors. Its shares are currently trading at 12.2 times forward earnings, below its five-year average of 14.6 times, making it an attractive option for those looking to capitalise on its growth potential in the AI space and its expanding international market presence.
As the company prepares to announce its financial results next week, investors are eager for more details on the progress of Alibaba’s AI models and its outlook for the cloud business, which remains a key component of its strategy moving forward.
